MOSL: INTERGLOBE AVIATION (Neutral)-EBITDAR marginally above estimate-PAT boosted by higher OI
InterGlobe Aviation: EBITDAR marginally above estimate; PAT boosted by higher OI
(INDIGO IN, Mkt Cap USD7.5b, CMP INR1238, TP INR1307, 6% Upside, Neutral)
INDIGO reported revenue of INR61.8b (est. of INR60.4b; +24% YoY, +17% QoQ) and EBITDAR of INR19.4b (est. of INR18.4b; +34% YoY, +24% QoQ) – implying a marginal beat, led by higher total yield of INR4.29 (est. of INR4.25; +8% YoY, +3% QoQ) due to credits received from manufacturers. Passenger ticket yield stood at INR3.7 (est. of INR3.73; +6.3% YoY, +3.7% QoQ). PAT of INR7.6b (est. of INR6.5b; +56% YoY, +38% QoQ) was boosted by higher other income of INR2.7b (est. of INR1.8b; +58% YoY, +27% QoQ) and lower depreciation of INR1.1b (est. of INR1.2b; 9% YoY, +5% QoQ). In 3QFY18, forex gain stood at INR803m, of which management booked INR408m in other income and INR395m in other expenses. Like in the previous quarter, management booked undisclosed credits from manufacturers (related to aircraft grounding, and delivery delays in early part of 3QFY18), supporting profitability.
- Ticket yield up 6% YoY: INDIGO’s ticket yield rose 6% YoY (+3.7% QoQ) to INR3.7 (est. of INR3.73), led by seasonal demand. Total yield grew 8% YoY (+3% QoQ), led by (a) ancillary revenue (INR7b; +22% YoY, +12% QoQ) and (b) other operating income (INR1.4b; +233% YoY, flat QoQ). Other operating income was likely higher due to credits received from manufacturers.
- Higher capacity addition in seasonally lean 4Q may pressurize margins: Management guided for 24% YoY ASK growth in 4QFY18, as it added 8 NEOs and 3 ATR aircraft in Nov-Dec 2017. We believe that higher capacity addition in a seasonally lean quarter, along with rising crude oil prices, would hurt margins. We raise our Brent price assumption to USD64.6/bbl from USD60/bbl for 4QFY18, resulting in ~15% cut in earnings for 4QFY18.
Interglobe Aviation Ltd. InterGlobe Aviation Limited, formerly InterGlobe Aviation Private Limited, is an India-based company engaged in operating passenger airline. The Company offers aviation, hospitality and travel related services. It operates through two geographic segments: Domestic, which includes air transportation within India, and International, which includes air transportation outside India. Its business lines include InterGlobe Air Transport, InterGlobe Aviation, InterGlobe Hotels, InterGlobe Technologies, InterGlobe Technology Quotient and InterGlobe Education. InterGlobe Technologies provides integrated information technology and business process outsourcing services. InterGlobe Technology Quotient distributes Travelport in India and Sri Lanka. It has four trademarks, namely, IndiGo Airways, IndiGo Airlines, IndiGo and IndiGo Air. It has around 96 aircrafts, and operates scheduled services to approximately 33 airports in India, with a maximum of around 593 domestic flights per day.
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